It’s well known that VCs and founders may not always have the same goals and this remains one of the most common talking points in the ‘bootstrap vs VC’ debate. I think the debate is largely trite, but it’s a valid point to consider. I wrote earlier about how VCs inadvertently created the faux-genius archetype – of the visionary dropout or the eccentric founder – to help craft compelling narratives and justify risky, high-stakes investments. In the same way, VCs may dictate and/or respond to market trends to generate self-interested outcomes. However, it’s worth remembering that the VCs and founders are reliant on each other and should interact fairly (theoretically) in pursuit of a positive-sum outcome.[1]
I find the VC-founder-market relationship quite interesting and reflective of classic game theory dynamics: comprising the principal-agent problem, asymmetric information, signalling and sequential games.[2] The principal-agent problem occurs when one party (the agent) is supposed to act in the best interest of another (the principal), but misaligned incentives lead the agent to prioritise their own goals instead. FOMO plays an especially crucial role in this tripartite relationship: VCs fear missing out on investing, founders fear miss out on building, and users don’t want to miss out on adopting early enough.[3]
The emergence of AI agents, whilst impressive, appears disproportionate to the ongoing market hype. Founders and VCs eagerly search for the next potentially transformative technology due to similar but different FOMO influences mentioned above. We’ve witnessed this pattern with LLMs/chatbots, crypto and the metaverse. I don’t doubt that autonomous agents could transform how certain processes are executed, but it’s worth being relatively cautious about lofty claims.
AI no doubt remains a revolutionary technology, but deciding to build a product around an ongoing trend – solely for the sake of it – presents significant risks. Many founders share the common goal of building valuable, scalable and sustainable businesses; these may simply not require LLMs, voice assistants, or agents of any kind.
When all is said and done, VCs make bets on teams, markets and trends. As founders, we make bets on ourselves. It’s ultimately up to us to apply discernment, ‘break the mould’ if choosing to deviate from market trends, and retain conviction whilst doing so.
[1] The Latin term ‘pari-passu’ comes to mind here.
[2] It’s partly why I believe there is significant hype and thought leadership around fundraising – how to, when to, whether to, etc – when it should be treated by both parties as a useful and helpful means to an end.
[3] I also think the intensity of FOMO works in this respective order.